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Monday, October 18, 2021

UK supply problems a ‘good thing’ if they prompt investment rethink, says Rishi Sunak

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U.K. Chancellor Rishi Sunak said that shortages in the British economy could be a “good thing” in the long run if they spur British companies to make investments to improve productivity.

There have been empty shelves in supermarkets and long queues at petrol stations across the U.K. in recent days as a result of supply-chain problems and a dearth of HGV drivers to move goods and fuel around.

Speaking to the BBC’s Today Program ahead of his speech at Conservative Party Conference in Manchester on Monday, Sunak said such problems would lead to higher wages which would, in turn, prompt investment.

“If that catalyzes people to think about their supply chains and their businesses differently to then invest in technology or productive equipment that can help drive up productivity as wage levels are higher, that can be a good thing. And we as a country have historically under-invested in kit — in things that drive up productivity,” he said pointing to financial incentives he has introduced to encourage investment by firms. “Those are the types of things that we’d like to see over time,” he added.

But Sunak insisted that the government was taking a “pragmatic” approach in the short term. “Control over immigration does not mean zero immigration,” he said pointing to a decision to issue 5,000 visas for skilled HGV drivers. The industry has derided the number as inadequate to solve the issue.

Sunak’s comments follow those by Prime Minister Boris Johnson who, referring to freedom of movement when the U.K. was an EU member, said on Sunday there would be no return to “uncontrolled immigration” to respond to supply chain description. “Yes, there will be a period of adjustment, but that is, I think, what we need to see,” he said.

The chancellor did not mention Brexit in his explanation for the current problems — blaming external factors instead. “We see disruptions and challenges to the supply chains, across the world due to lockdown and rapid reopenings,” he said, without acknowledging that supply problems are far more acute in the U.K. than across the EU.

He said he had no control “over the decision of a country in Asia to shut down a port over a coronavirus outbreak.”

“We can’t wave a magic wand and make global supply chain challenges disappear,” Sunak added.

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